Joe & Dan Intern. Corp. v. U.S. Fidelity & Guar. Co.

• Citation: 178 Ill.App.3d 741,533 N.E.2d 912
• Decision Date: 23 November 1988
• Docket Number: Nos. 87-3486,87-3523,s. 87-3486
• Parties: , 127 Ill.Dec. 830 JOE & DAN INTERNATIONAL CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, an insurance corporation, Mid-National Insurance Service, Inc., a corporation, and David Pomper, Defendants-Appellants, Cross-Appellees (Michaels-Peterson Insurance Service, Inc., a corporation, and Sam Schacter, Defendants-Appellees, Cross-Appellees).
• Court: United States Appellate Court of Illinois

Page 912

533 N.E.2d 912

178 Ill.App.3d 741, 127 Ill.Dec. 830

JOE & DAN INTERNATIONAL CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, an insurance

corporation, Mid-National Insurance Service, Inc., a

corporation, and David Pomper, Defendants-Appellants,

Cross-Appellees (Michaels-Peterson Insurance Service, Inc.,

a corporation, and Sam Schacter, Defendants-Appellees,

Cross-Appellees).

Nos. 87-3486, 87-3523.

Appellate Court of Illinois,

First District, Third Division.

Nov. 23, 1988.

Rehearing Denied Feb. 3, 1989.

Terrence J. Goggin, Paul E. Kralovec of Goggin, Cutler & Hull, Chicago (Jennifer Craigmile Neubauer, of counsel), for appellants Mid-Nat. Ins. Service, Inc., and David Pomper.

Torshen, Schoenfield & Spreyer, Ltd., Chicago (Jerome H. Torshen and Abigail K. Spreyer, of counsel), for appellee Joe & Dan Intern. Corp.

Justice FREEMAN delivered the opinion of the court:

These consolidated appeals arise from the lawsuit of plaintiff, Joe & Dan International Corp., against defendants, United States Fidelity and Guaranty Company (USF & G), Mid-National Insurance Service, Inc. and its president, David Pomper (hereinafter collectively "Pomper"), Michaels-Peterson Insurance Service, Inc. and its president, Sam Schacter (hereinafter collectively "Schacter"). After a jury trial in the circuit court of Cook County, the court entered judgment on the verdicts returned for plaintiff against USF & G and Pomper and for Schacter against plaintiff.

Plaintiff's amended complaint for declaratory judgment contained four counts pleaded in the alternative. Count I, against USF & G, alleged the following: that on December 26, 1984, Sam Schacter, plaintiff's insurance broker, requested of USF & G, through its agent David Pomper, that it reissue a previously cancelled "all risks" policy on a "named perils" basis only, excluding coverage for burglary, to cover plaintiff's retail clothing business. On that date, David Pomper, as USF & G's agent, advised Sam Schacter that plaintiff was "bound," i.e., covered by insurance. On January 24, 1985, a fire occurred on plaintiff's business premises which totally destroyed its business property. After plaintiff, through Schacter, notified USF & G, through Pomper, of the fire, Pomper advised Schacter that plaintiff was covered by insurance. Thereafter, Pomper denied that plaintiff had been "bound" and informed Schacter that USF & G would not cover plaintiff's fire loss. Plaintiff relied on Pomper's advice to Schacter that it was covered by insurance and did not seek insurance coverage elsewhere. At no time prior to the fire did USF & G or Pomper advise plaintiff or Schacter that USF & G would not cover plaintiff on a "named perils" basis only, excluding burglary. On the basis of the foregoing, plaintiff claims USF & G is bound by the acts of its agents, to cover plaintiff's fire loss.

Count II, against Pomper, alleged that, from the time plaintiff first obtained business insurance from USF & G through Pomper, the latter had, inter alia, warranted to plaintiff and Schacter that he had the authority to act as USF & G's agent and, specifically, to bind USF & G to cover plaintiff on a "named perils" basis only, excluding burglary. Plaintiff, relying on Pomper's warranty of authority, believed it was covered on a "named perils" basis by USF & G. Pomper did not have the authority warranted and is therefore liable for plaintiff's fire loss due to the breach of warranty.

Count III was stricken before trial. Count IV of the complaint alleged that Schacter, as plaintiff's insurance broker, owed plaintiff a duty to obtain insurance coverage, which he undertook after cancellation on December 14, 1984 of plaintiff's "all risks" coverage by USF & G, or to advise plaintiff promptly if no coverage was available. Schacter breached that duty by negligently failing to obtain coverage and to advise plaintiff thereof. Schacter's failure to obtain insurance coverage on a "named perils" basis only, excluding burglary, proximately caused plaintiff's damages from the fire loss.

Each defendant filed counterclaims for contribution against the other defendants. USF & G alleged that Pomper had no authority after December 14, 1984 to bind insurance with USF & G as insurer and plaintiff as insured. It further alleged that any liability to plaintiff would be solely the result of Pomper's breach of duty and unauthorized representations to Schacter. Pomper alleged that, on or about December 26, 1984, he requested that USF & G issue a "rewrite" of plaintiff's previously cancelled "all risks" policy on a "named perils" basis, including fire protection. He further alleged that USF & G negligently failed: (1) to process the request for a "rewrite" promptly; (2) to promptly notify Pomper of the status of the request; and (3) to notify plaintiff that Pomper had limited authority to bind coverage for USF & G. Lastly, Pomper alleged that Schacter breached his duty to obtain insurance coverage for plaintiff, failed to advise plaintiff thereof, failed to ascertain the extent of Mid-National's authority to bind coverage for USF & G's on rewritten policies and failed to monitor the status of the request for coverage.

USF & G now appeals the trial court's denial of its motions for directed verdict, a j.n.o.v., or a new trial. Pomper appeals the trial court's denial of his motions for j.n.o.v. or a new trial, the dismissal of his counterclaim against USF & G, the directed verdict for USF & G on its counterclaim against him and the denial of a directed verdict on, and the dismissal of, his counterclaim against Schacter. Plaintiff cross-appeals the denial of prejudgment interest and prays, in the event relief is granted to any defendant, for a new trial as to all defendants, including Schacter.

We have considered the arguments of USF & G and Pomper regarding the denial of directed verdicts and judgments notwithstanding the verdicts in plaintiff's case against them. However, those arguments do not convince us that the standard established for such relief in Pedrick v. Peoria & Eastern R.R. Co. (1967), 37 Ill.2d 494, 229 N.E.2d 504, is satisfied here. We therefore affirm the denial of that relief by the trial court.

USF & G and Pomper make various arguments respecting the denial of their motions for new trial. We believe that Pomper's assertion that the verdicts rendered against him and USF & G in plaintiff's favor were legally inconsistent is dispositive of his, and, per force, USF & G's right to a new trial.

Preliminarily, we address, sua sponte, whether the inconsistency of the verdicts was properly preserved for appeal. At the close of all the evidence, the following colloquy occurred between Pomper's trial counsel and the court:

"MR. GOGGIN [Defense Counsel]: Motion for directed verdict on behalf of * * * Mid-National * * * and David Pomper in essence on the grounds, your Honor, that the allegations against Mr. Pomper are for breach of warranty, and there has been--according to the allegations of the complaint, the warranty was that he had authority to bind USF & G and by his conduct and acts and oral statements did bind USF & G.

THE COURT: No. The count against you was that he did not. The breach of warranty assumes a lack of authority. It's an inconsistent theory; apparently [plaintiff's counsel] wants to go to the jury on an inconsistent theory. The element of it is that he did not have authority."

Thus, the trial court recognized that Pomper's counsel was moving for a directed verdict on the basis of the inconsistency inherent in plaintiff's claims against Pomper and USF & G. Moreover, after the jury returned its verdicts against USF & G and Pomper, Pomper's counsel moved for a mistrial on the basis of the inconsistency in the verdicts. This motion was not timely. A motion for mistrial is properly made only before a verdict is rendered. It is not properly made either after a verdict is rendered or a judgment is entered on the verdict. (Williams v. Deasel (1974), 19 Ill.App.3d 353, 355, 311 N.E.2d 414.) However, we believe that motion, Pomper's motion for directed verdict at the close of all the evidence and the motion for new trial based on the denial of the motion for mistrial adequately preserved the inconsistency of the verdicts for appeal. Cf. City of Chicago v. Garrett (1985), 136 Ill.App.3d 529, 91 Ill.Dec. 127 483 N.E.2d 409 (no waiver where: (1) after verdict, defendant renewed motion for mistrial filed but withdrawn before verdict and requested new trial; and (2) colloquy between trial court and counsel on mistrial motion revealed awareness of objection and consideration of its merits).

Proceeding to the merits of Pomper's claim, he argues that to find USF & G liable to plaintiff on the coverage which he, Pomper, allegedly bound, the jury had to find that USF & G clothed him with apparent authority to bind its coverage. He also asserts that, in order to find him liable to plaintiff for breach of an implied warranty of authority, the jury had to find that he lacked authority to bind USF & G's coverage. Pomper concludes that it is impossible for him to simultaneously lack authority to bind USF & G and thus breach an implied warranty of authority and to possess apparent authority to bind USF & G to an insurance contract, breach of which rendered USF & G liable thereon.

Based on general principles of agency law, we agree that Pomper and USF & G could not both be liable to plaintiff on the theories asserted against them at trial, i.e., liability for breach of an implied warranty of authority and liability on the contract of insurance which USF & G had apparently authorized Pomper to enter on its behalf.

Section 329 of the Restatement (Second) of Agency states:

"A person who purports to make a contract, conveyance, or representation on behalf of another who has full capacity but whom he has no power to bind, thereby becomes subject to liability to the...